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Hermes comments ahead of Siemens AGM

30 January 2018

Ahead of the Siemens AGM tomorrow, Dr Michael Viehs, Hermes EOS, discusses why they will support the election of all of the company’s nominees to the supervisory board.  Furthermore, Hermes EOS will support all management proposals and ask for a commitment from the company to enter into a dialogue about the effects of climate change on its business model.

Strategy “Vision 2020”

“We are generally pleased with the company’s implementation of its strategy Vision 2020 and believe that the 2017 financial results reflect the progress the company made in positioning itself appropriately for the future. Moreover, we believe a more streamlined corporate structure which moves away from that of a traditional conglomerate is the way forward to create long-term value for all stakeholders. This is something we have encouraged the company to do in our engagements.”

“Furthermore, we would like Siemens to continue working towards achieving the target margin ranges set, specifically in the Power and Gas unit. In light of the climate related challenges that this unit has and will be facing, which in our view could result in a further decline in demand for conventional power and gas products, we believe that a reconsideration of the unit’s underlying business and its operations is inevitable. However, we strongly encourage the company to undertake these efforts in a sustainable and socially acceptable fashion, appropriately considering and protecting the interests of all stakeholders. In that regard, we question the company’s communication about the restructuring and the corresponding job cuts in the conventional power unit.

“While generally supportive of Siemens’ strategy, we encourage the company to design a secondary plan which also provides a governance framework for the new corporate structure, reassuring investors what the new Siemens will look like and how it will be managed. Transparent communication about this will be key.

Supervisory board

“Hermes EOS will be recommending voting in favour of all candidates to the supervisory boards. We are also supportive of the supervisory board’s suggestion to make Jim Hagemann Snabe its new chair subsequent to the AGM. With his expertise in software and digitalisation, it is our view that he is well-placed to contribute to Siemens’ further transition.

“From our assessment and dialogue with the company, we believe that the new candidates for the supervisory board will bring the relevant knowledge, skill sets and expertise necessary to effectively monitor and guide Siemens. However, we remain critical about the high number of positions that some of the supervisory board members hold and are greatly concerned with how the supervisory board ensures that all members have sufficient time to fulfil their duties and responsibilities at Siemens in good and in difficult times.

“The incumbent chair of the supervisory board, Gerhard Cromme, will retire from his position after the 2018 AGM. Mr Cromme became chair in a period when Siemens was hit by an unprecedented corruption scandal and had to deal with its implications between 2006 and 2009. Under his leadership and guidance, Siemens successfully dealt with the implications of the scandal. We thank him for his 15-year tenure on Siemens’s supervisory board and his contribution to the success of recent years.

Climate change

“Hermes EOS supports the newly launched investor initiative Climate Action 100+, which identifies the world’s 100 largest greenhouse gas emitters, including Siemens, based on estimations from the CDP. Therefore, we will request Siemens to commit to an enhanced dialogue with investors around climate -related issues. Generally, we are satisfied with the company’s sustainability initiatives to mitigate its impact on the environment and the corresponding reporting thereof. However, we strongly encourage Siemens to extend its reporting on climate change to be consistent with the final recommendations of the Task Force on Climate-related Financial Disclosures (TCFD).”

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